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Introduction of the Australian small business and family enterprise Ombudsman

On 3 June 2015 the Australian Government introduced theAustralian Small Business and Family Enterprise Ombudsman Bill 2015 (Cth) (Bill). The Bill transforms the Australian Small Business Commissioner into the Australian Small Business and Family Enterprise Ombudsman (the Ombudsman) and outlines the functions and powers of the Ombudsman.

The Ombudsman will act as an advocate for and advisor to small businesses and family enterprises.

Meaning of ‘Small Business’ and ‘Family Enterprise’

The Bill defines ‘small business’ as a business, enterprise, activity, project, undertaking or arrangement that has fewer than 100 employees or has a revenue for the previous financial year (or current financial year if the business was not carried on at any time during the previous financial year) of $5 million or less.

A ‘family enterprise’ is defined as a small business that is operated as a family enterprise. There is no further definition of this concept in the Bill.

Key Functions of the Ombudsman

The Ombudsman will have two key functions.

1. Advocacy and Policy Development

The Ombudsman will be a Commonwealth-wide advocate for small businesses and family enterprises. It will listen to small businesses and family enterprises and present their views to the Government to better inform the successful implementation of the Government’s policy agenda for small business and family enterprise. The Ombudsman will have the power to conduct inquiries into the effect of relevant laws, policies and practices on small businesses and family enterprises, and consider how these might be improved.

The Ombudsman will be a contributor to Commonwealth laws and regulations that stand to benefit small businesses and family enterprises by providing independent advice on draft legislation, regulations and practices. It is anticipated that this will improve the relationship between the Government and the small business sector by removing “red tape” burdens where possible, and ensuring that small business interests are at the centre of policy design.

2. Assistance with Dispute Resolution

The Ombudsman will be a “concierge” for dispute resolution. This function acknowledges that it is often difficult and costly for small business and family enterprise to take on big business when a dispute arises. The Ombudsman will respond to requests for assistance by an operator of a small business or family enterprise, but only where the issue is within the Ombudsman’s jurisdiction under the Bill. For example, the issue must involve an action:

by a Commonwealth agency or a constitutional corporation that affects a small business or family enterprise; or

by any entity that affects a small business or family enterprise that is a constitutional corporation; or

by any entity that affects a small business or family enterprise in the course of trade or commerce internationally, across states and territories or within a territory.

Notably, internal disputes within a small business or family enterprise cannot be referred to the Ombudsman.

The Ombudsman may refer the matter to the appropriate agency or offer its own limited dispute resolution service to assist small businesses and family enterprises to resolve disputes early. The Ombudsman will fill a current gap by connecting small businesses and family enterprises with appropriate dispute resolution providers.

It is anticipated that this function will improve business productivity, preserve business relationships and encourage small businesses and family enterprises to avoid expensive litigation.

There is intended to be a clear separation between the Ombudsman’s advocacy and dispute resolution functions.

Appointment of the Ombudsman

The Ombudsman will be appointed in writing by the Governor-General and will hold office on a full time basis for a period of not more than five years (but will be eligible for reappointment). The Ombudsman will be supported by the Office of the Ombudsman.

Interaction of the Ombudsman with Other Officials

The role of the Ombudsman will be complementary to, but not overlap or duplicate, the roles and responsibilities of other ombudsmen, the state small business commissioners and the services provided by state and territory governments where there are no small business commissioners.

The Bill is not intended to exclude or limit the operation of any state or territory law.

The Ombudsman will be required to report regularly to the Minister for Small Business on its activities and small business concerns.

Possible Impacts of the Proposed Amendments on Small Businesses and Family Enterprises

While the introduction of the Ombudsman appears to be of significant benefit to small businesses and family enterprises, these entities may face penalties if they do not comply with the Ombudsman’s requests, as discussed below.
The Ombudsman will have the power to require a person to send, to the Ombudsman, information or documents which are relevant to the Ombudsman’s research or inquiries. Failure to comply with such a request may result in financial penalties. Note there is the opportunity to submit to the Ombudsman that the information is confidential and should not be disclosed to the public (e.g. information that is commercial-in-confidence, where disclosure is contrary to the public interest or would cause undue distress or embarrassment).

The Ombudsman will also have the power to hold hearings where the Minister has referred a matter to the Ombudsman for inquiry. The Ombudsman may summon a person in writing to appear at a hearing to give evidence and to produce documents. If a person fails to appear, refuses to answer a question as required by the Ombudsman, or refuses to produce a required document, that person may receive a financial penalty. Note the considerations regarding confidential information mentioned above will also apply in this circumstance.

In respect of the Ombudsman’s dispute resolution service, if the parties refuse to participate or withdraw from the recommended process, the Ombudsman can make this knowledge public.

As a result of the potential penalties for non-compliance with requests made by the Ombudsman, if the Bill is passed small businesses and family enterprises should carefully consider their approach to the Ombudsman, and take the Ombudsman’s recommendations very seriously. If a small business or family enterprise is concerned about a request to produce information or documents, or participate in an inquiry, then it may be appropriate to seek independent advice on how to respond.

It will otherwise be a matter of time before the benefits of the Ombudsman’s advocacy and advice/assistance functions can be assessed. In particular, in relation to the dispute resolution functions, it will be interesting to watch how the Ombudsman works with small business and family enterprise to promptly determine which matters fall within its jurisdiction. Further, small business and family enterprise will be interested to see how effectively the Ombudsman can deal with referred disputes in a way that will be of real value to small businesses or family enterprises.

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